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Analytical Paper on the Importance of Filing with MOFCOM – Recent Penalty Decisions for Failure to Notify
2018 ABA Conference: ‘Merger Control 101’ Panel
Year published: 2018

"When carrying out an assessment of where merger notifications in the context of a merger, acquisition or joint venture should be made, it is important to bear in mind the implications and potential penalties of implementing a transaction without clearance. In China, the Anti-Monopoly Bureau of the Ministry of Commerce in China ('MOFCOM') has been stepping up its enforcement actions against merging parties for failing to notify.

This paper considers MOFCOM’s recent failure-to-notify penalty decisions. Several observations can be drawn from the cases to date. For example, MOFCOM is not afraid to fine both Chinese and foreign firms, including in respect of a foreign-to-foreign transaction. As regards the level of fine, MOFCOM has yet to impose the maximum fine, but it tends to impose higher fines for recidivism or when it is evident that the parties are aware of, and have ignored, the obligation to notify. Conversely, fines appear to be reduced when the parties actively cooperate with MOFCOM’s investigation. As regards the types of transactions involved, some of MOFCOM’s early decisions involved acquisitions of minority interests, whereas the more recent cases have involved slightly more complex analysis, such as when 'control' is acquired in the context of multi-step transactions. The investigations have commenced both as a result of MOFCOM’s own initiative and third party complaints.

Looking ahead, the key challenge to MOFCOM’s enforcement efforts is the fact that the Chinese Anti-Monopoly Law ('AML') stipulates a maximum fine of only RMB 500,000 (approximately US$80,000) for failing to notify a relevant transaction. By global standards, this is very low and therefore may significantly limit the deterrence effect of MOFCOM’s failure-to-notify penalty decisions. However, there have been calls for changes to be made to the AML to increase this maximum fine which could further increase the risks for companies which fail to notify a relevant transaction in China."

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